The Controller of Budget Dr. Margaret Nyakang’o took to the stage on 16th September 2022 to speak about County Planning, Budgeting, and Financing during a three-day induction workshop for Governors and Deputy Governors organized by the Council of Governors at Pride Inn hotel in Mombasa. The workshop was aimed at building capacity of the newly elected county leadership as well as providing a reference point for the required systems, processes and structures for optimal functioning of County Governments.
Dr. Nyakang’o spoke on the mandate of the Controller of Budget, the County Governments Budget Implementation Review Reports (BIRRs), the procedure for approval from public funds, the compliance and enforcement of budgetary ceilings, and pending bills.
She highlighted several issues on BIRRs. Key among them being the high wage bill, under-performance of Own Source revenue (OSR), low expenditure on the development budget, use of manual systems to process payroll, delays in submission of Financial and Non-Financial reports to the Controller of Budget, disputes in resource allocation, failure by the County Governments to adhere to public participation requirements, weak budgetary controls and use of revenue at the source where some counties reported expenditure that exceeded approved exchequer issues and budget ceilings, mutilation of budgets during Supplementary budgets among others.
“Regulation 25 (b) of the Public Finance Management (County Governments) Regulations, 2015 provides that county government’s expenditure on wages and benefits for its public officers shall not exceed 35% of the county government’s total revenue,” Dr Nyakang’o retaliated. She further explained that on the contrary, in FY 2021/22, counties spent Kshs.190.11 billion on the wage bill which was 43.6% of the realized revenue of Kshs.427.47 billion. From her report, only four counties namely Mandera, Tana River, Isiolo and Kwale were within the ceiling.
The Controller of Budget also spoke on under-performance of Own Source Revenue (OSR) where she mentioned the main sources of OSR to be property taxes, entertainment taxes, and charges for services such as vehicle parking fees, entry into county parks, business licenses, and permits which counties are granted power to impose by Article 209 of the Constitution. She quoted her FY 2021/22 report where she mentioned that County Governments generated a total of Kshs.35.91 billion, which was 59.4 per cent of the annual target of Kshs.60.42 billion.
“In the last 5 years, the performance of OSR has averaged 64.9 % of set annual targets which translates to unrealized revenue of Kshs.95.45 billion. The underperformance of OSR collection implies that there was a hidden budget deficit,” COB explained.
Dr Nyakang’o reported that there was low expenditure on the Development Budget. Making reference to Section 107(2) (b) of the PFM Act, which provides that over the medium term, a minimum of 30% of the County Government’s budget be spent on development programmes, she said that in FY 2021/22, County Governments incurred a total of Kshs.98.47 billion representing an absorption rate of 50.9% of the cumulative annual development expenditure budget of Kshs.193.53 billion.
“In the last 5 years, the county governments spent 26.5% of their total expenditure on development programmes which is a violation of the law”, she lamented. This low absorption of the development budget according to her indicated that Counties did not prioritise the implementation of development projects. She laid emphasis that County governments should prioritise and ensure that expenditure on development activities meets the minimum set ceiling of 30 per cent of their budgets.
She reiterated that Counties should fast-track the acquisition of staff personal numbers in order to ensure the entire wage bill is processed through the prescribed personnel system when processing their payroll. She then advised County governments to migrate to the Unified Human Resource Information System by October 2022 in line with the guidelines by the Head of Public Service.
Dr Nyakang’o addressed matters on pending bills where she outlined various interventions that have been put in place to curb them. For instance, she said that the government has introduced measures for clearing the accumulated pending bills whereby, the Office of the Controller of Budget has been tracking payment of the eligible pending bills. She mentioned that her office has recommended that pending bills be treated as a first charge, counties have also been advised to develop repayment plans and both levels of governments should ensure that the procurement plans align with the disbursement of funds among other measures.
In line with the PFM Act, 2012 which outlines the fiscal responsibility principles and provides a framework that guides both national and county governments in setting priorities that ensure public resources are utilized in an effective and efficient manner, the COB urged the County Governments to ensure compliance with the principles set out in the PFMA and its regulations in order to improve budget implementation.
In conclusion, Dr Nyakang’o made it clear that the Office of the Controller of Budget is always hands on to offer support in all financial matters related to budget implementation.